Financing jet development<\/p>\n
The 10-day-old PT Dua Satu Tiga Puluh (DSTP) may have the most
\npolitical clout of all private companies in Indonesia. President
\nSoeharto and two former vice presidents sit on its board of
\ncommissioners and three other high officials, including
\nMinister\/Cabinet Secretary Saadilah Mursjid, in its management.
\nWhile each official is serving in a personal capacity, their
\nrepresentation will still have political and business
\nramifications. So what is the point of loading a company with so
\nmany political figures?<\/p>\n
The answer lies in the formidable task DSTP has set for
\nitself. The company was formed to raise funds for the N-2130
\npassenger jetliner being developed by the state-owned PT IPTN
\naerospace industry in Bandung. The project has a long pay-back
\nperiod and is highly capital and technology intensive. However,
\nPT IPTN has yet to make its mark in the fiercely competitive
\ninternational aircraft market, or even in the Asian market. Thus
\nDSTP needs political weight to assure potential investors of the
\nproject's prospects.<\/p>\n
The immediate results have been impressive. Fifty-five
\nbusinessmen have put up 25 percent of DSTP's paid-up capital of
\nUS$100 million. Without political influence, it would have been
\nextremely difficult for DSTP to sell the project to investors.<\/p>\n
Private sector analysts and the government have long differed
\non the economic and commercial viability for Indonesia, a largely
\nagriculture-based country with a per capita income of less than
\n$900, to enter the cut-throat international airplane market.<\/p>\n
President Soeharto, one of the company's founders, believes
\nthat the twin-jet airplanes will help meet the vast archipelago's
\ntransportation needs in the next 10 to 20 years.<\/p>\n
He argues that development of the N-2130 jet, which is
\nexpected to take five to eight years, must begin now. But the
\nlong gestation period of the project also means that its
\ninvestors should be oriented toward long-term benefits and be
\nwilling to forgo dividends and capital gains for at least 10
\nyears.<\/p>\n
Many analysts share Soeharto's belief in the market potential
\nof the N-2130 in Indonesia and overseas. As per capita income
\nlevels increase with economic growth, the volume of air traffic
\nfor both passengers and cargo in the country will expand. The
\n100-130 seat jetliner is indeed suitable to bridge the numerous
\nislands.<\/p>\n
The same analysts, however, question IPTN's ability to
\nmanufacture the high-tech airplane. Moreover, selling jetliners
\nrequires huge financing and well-managed networks of spare parts
\ndepots. Airplane manufacturing also requires a high economies of
\nscale.<\/p>\n
The investor outlook might have been different had the N-250
\nturbo-prop airplane, currently being developed by IPTN, achieved
\ncommercial success. The 70-seat propeller aircraft isn't even
\nscheduled to start commercial sales until 1998.<\/p>\n
Despite its remarkable progress over the last 19 years, IPTN
\noperations in Bandung are like an island. The company has
\nvirtually no backward nor forward linkages with other industries
\nin the country, unlike in the United States and Europe, where
\naircraft manufacturing involves hundreds of vendors.<\/p>\n
The passenger aircraft market is dominated by Airbus and
\nBoeing. In terms of seating capacity, the N-2130 will compete
\nwith the Boeing-737 series now used widely in Indonesia. Even the
\nNetherlands' Fokker, which established its trademark in the
\ninternational passenger jetliner market, has declared bankruptcy.
\nJapan has established numerous trademarks for high-tech products
\nbut has not dared venture into the manufacturing of commercial
\naircraft.<\/p>\n
Given the odds, President Soeharto was wise in ruling out the
\nuse of the taxpayers' money (state budget) to finance the jet
\nproject. His personal involvement will continue to be strategic
\nin attracting private investors.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/financing-jet-development-1447893297",
"image": ""
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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